3-Analysis of gross profit During 20 on sales, compared with the rate it has ave

Question

3-Analysis of gross profit During 20 on sales, compared with the rate it has averaged in recent years. You are asked to deterror proft 17, King's Drug Company experienced a significant increase in the rate of gross most likely reason for this improvement. Support your answer The following data are from the records of the company: 2017 sales (at an average price of $50 a unit) were $2,300,000. 2017 purchases (at an average The company uses the LIFO inventory method and has used it since 1988. cost of $30 a unit) were $1,200,000. nventory cut-off. Vogts Company sells TVs. The perpetual inventory was stated as $38,500 on the books at December 31, 2017. At the close of the year, a new approach for compiling inventory was used and apparently a satisfactory cut-off for preparation of financial statements was not made. Some events that occurred are as follows 1· TVs shipped to a customer January 2, 2018, costing $5,000 were included in inventory at December 31, 2017. The sale was recorded in 2018. 2· TVs costing $15,000 received December 30, 2017, were recorded as received on January 2, 2018 3· TVs received during 2017 costing $4,600 were recorded twice in the inventory account. 4· TVs shipped to a customer December 28, 2017, f.o.b. Shipping point, which cost $10,000, were not received by the customer until January, 2018. The TVs were included in the ending inventory TVs on hand that cost $6,100 were never recorded on the books. 5· Instructions Compute the correct inventory at December 31, 2017

Explanation / Answer

Ans 3: No of Units Sold         = 2300000/50= 46000 Units

        No of Units Purchased= 1200000/30= 40000 Units

Six thousand more units were sold than were purchased. This might resulted in the partial liquidation of the beginning LIFO inventory layers. Assuming rising prices, the increased rate of gross profit is most likely due to the matching of old, lower inventory costs against current sales.

Ans 4: its a separate question , please upload it separately and let comment incase of any concern.

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